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Payment on Account: What small business owners need to know & why you should file early!

Writer's picture: Emmie TurnerEmmie Turner

If you have received a statement from HMRC in the past few weeks reminding you that your payment on account is due by 31st July, I’m here to shed light on what payment on account is so you can better understand this aspect of tax compliance. With the 31st July deadline fast approaching, its important to know what payments on account entail and who it applies to!


What are payments on account?

When you're self-employed, HMRC may require you to make payments on account towards your future tax bill. These payments act as an advance payment for your tax liability and help you spread the cost over the year. They are calculated based on your previous year's tax bill. The first payment on account is paid in January, and the second is due on the 31st July with a balancing payment due by the 31st January the following year (along with the next year’s first payment on account).


Who needs to make payments on account?

If your tax bill exceeds £1,000 and less than 80% of your tax liability is covered through tax deductions at source (e.g., through PAYE), you're likely to be required to make payments on account. The first time you're required to make a payment on account can come as a shock as you effectively need to pay 150% of your tax bill in one go so it's essential to understand your individual tax situation and consult with a professional bookkeeper to ensure compliance.


At FJH Bookkeeping Services we always recommend that our clients file their tax returns as early as possible. Filing your tax return early offers several advantages:

- It provides a clear picture of your tax liability, allowing you to plan and budget effectively.

- Early filing also minimizes the risk of penalties for late submission and gives you peace of mind, knowing that your tax obligations are taken care of.


This month we'll be diving deeper into the world of tax returns, bookkeeping services, and strategies for optimising your financial processes on our social media channels, so be sure to give us a follow on either Facebook or Instagram!


If you'd like to speak to us about how we can support you with any aspect of bookkeeping, drop us an email over at info@fjhbookkeepingservices.com

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